A property appraisal is a process of estimating the value of real estate. It is an unbiased opinion of a home’s value given by a professional.
Appraisals are almost always used in purchase and sale transactions, where they are used to determine if a home’s price is appropriate for its location, condition and features. It is important to note that an appraisal is not a commodity in itself.
Every property is unique for many reasons, the location being one of them. Describing a particular real property and collecting data relative to supply and demand are the appraiser’s responsibilities.
An appraiser should be qualified — licensed or certified — and familiar with the local area, though this is not always the case. The appraiser must also be impartial and have no interest, whether direct or indirect, in the transaction.
Generally, property appraisal value is swayed by recent sales of similar properties in the same locality and current market trends. The home’s features and amenities, number of bedrooms and bathrooms, floor plan and square footage are also significant factors when assessing its value.
An appraiser would perform a thorough visual inspection of the interior and exterior of a house and take note of any conditions or needed repairs that would affect its value. The appraiser would then provide analysis and conclusions on the property’s value based on their observations.
For buyers, proper appraisals could be advantageous. For example, a low appraisal can bolster the buyer’s negotiating power when trying to convince the seller to lower the price.
However, like the proverb: one man’s meat is another man’s poison. An appraisal may help a buyer avoid overpaying for a home. The seller may feel reluctant to drop the price or even consider a lower appraisal to be inaccurate.
If an appraisal inhibits your home sale or purchase process, you may consider another appraisal by a different person for a second opinion.
That said, appraisals are not entirely perfect, as an appraiser may make mistakes or use old, less relevant information. You could consider presenting more evidence to the original appraiser to support a higher value. The appraiser may concur and revise the evaluation.
After gathering all necessary information, whether independently or with some assistance, the appraiser will organize the facts using a set of methods and procedures.
If you have ever heard of an appraisal of the same property yielding different results, you may have wondered why. Why would two appraisals on the same house within a short time differ by tens of thousands of dollars? There are a variety of situations that could cause the variance.
The appraisal process itself suffers from a lack of objective standards to be followed. Even professional appraisal societies have different standards for gauging the competence of an appraisal. What’s also not helpful is that almost anyone can become an appraiser.
If differences in appraisal values are limited to a few thousand dollars or less, it may be due to the subjective differences between appraisers. That begs the question: is property appraisal an art or a science?
Property appraisal, like most other professions, is a mixture of art and science. Until the sale occurs between a buyer and a seller, with none under pressure to buy or sell, you cannot tell the exact value of the property.
To get the best appraisal for a property, owners must help the appraiser with whatever they need, whenever possible.
One such assistance comes in the form of recent nearby home sales prices. As home purchases are currently on the high, there is a shortage of appraisers. As a result, an appraiser may be called upon to assess properties in unfamiliar areas. Without recent sales price information, the appraiser may need to depend on old data, resulting in a low appraisal.
As a homeowner, you may also want to prepare for the appraiser’s visit in other ways. You could provide written or illustrated information about room dimensions and the appraised value needed. In addition to recent nearby sales prices, you can provide recent prices of vacant lot sales along with square footage information, if available.
Of course, some appraisers may prefer you do not prepare this information, but most welcome the assistance. The appraiser will likely double-check the accuracy of your report and may even reject some aspects. However, giving the appraiser this information goes a long way to prevent errors.
Note that because the appraisal process has several subjective elements, no two appraisers, irrespective of experience, will completely agree on an absolute value.
When an appraiser renders a final opinion on the value of a property, they employ personal judgment in combination with any scientific procedures required.
It may be said that an appraiser has some freedom in rendering the final value opinion. However, the stated value is significantly influenced by the data and other information collected, in addition to knowledge and expertise. It is fair to conclude that an appraisal is as much a work of art as it is a science. Call AmeriMac Appraisal Management today if you have questions about the process.